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© 2012 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public.
Custom Modeling and Analytical Consulting
2 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Providing clients with our expertise and strategic thinking to deliver advanced custom models for enhanced decisions
Modeling in the current environment
Custom modeling overview
Our modeling approach
Our experience
Agenda
3 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
It is becoming increasingly important to assess your custom risk models to ensure optimal predictive performance
The OCC 2011-2012 Supervisory Guidance on Model Risk Management requires the annual validation of existing risk models and the attributes used to build them
To help you meet current regulatory requirements, Experian’s analytical consulting team offers:
Proven modeling methodologies
► Our consultants and analysts utilize the most sophisticated and advanced statistical techniques to develop custom models
The industry’s most comprehensive set of data assets and credit attributes for model development
► Experian’s Premier AttributesSM incorporate the most up-to-date bureau data available, resulting in the most robust and predictive models
Modeling in an increasingly regulated environment Overview
4 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Consumer behaviors and financing requirements continue to rapidly change
A model development population should represent the future through-the-door population
Experian may employ weighting of the sample selection population to adjust for changes in product mix, product terms, policy rule changes, seasonality, etc.
Recommend using an out-of-time validation sample to compare to other available scores and ensure a stable scorecard
► Out-of-time validation will be used to evaluate the ability to update the model based on changes to the overall economy
Modeling in uncertain economic times Model development
5 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
As one of the leading modeling companies in the world, Experian Decision Analytics has a depth of experience in building custom scoring solutions that is unsurpassed in today’s marketplace
Experian’s team of expert consultants and statistical analysts have a vast background and significant experience in developing and delivering custom models which extend across all stages of the credit life cycle, including:
► Marketing analysis
► Account acquisition
► Account management
► Collections
Our team leverages Experian’s core data assets to design and develop custom models using advanced analytical techniques that provide for better decisioning and efficiencies
Custom Modeling Our expertise
6 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Custom Modeling Examples
Whether the goal is finding new customers, offering them the most appropriate terms, or managing the relationship throughout the full Customer Life Cycle, Experian has developed models which allow our clients to ‘see’ their customers and manage the decisioning process
The following table provides an example of the types of solutions Experian has developed:
Front-end risk Prescreen risk Fraud Bankruptcy First payment default
Behavioral Credit line
management Roll rate Delinquency Transactional fraud
Early stage collections Late stage collections Recovery Loss forecasting
Risk
Account acquisition Account loss Account management
Response Activation Conversion Purchase propensity Income / wealth Loyalty
Target
Profitability Usage Activation /
reactivation Balance transfer Cross-sell Revenue
Attrition Churn rate Pre-payment Retention
7 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Custom models to meet varying decision points Customer Life Cycle application
Risk Bankruptcy Profit Response
Target marketing
Account acquisition
Risk Bankruptcy Profit Revenue Ability to pay
Account management
Risk Bankruptcy Authorization Activation Retention
Loss management
Bankruptcy Collections Recovery Loss forecasting
Who to target What to offer How much to offer What terms Who to price Increase response
Accept or decline Loan amount Loan terms Pricing Up-sell / down-sell Cross-sell
Account review / monitoring
Authorization / shadow limits
Line management Future solicitations
Prioritization Strategic actions In-house vs.
agency placement Capital allocation
8 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Client-specific modeling engagements address the unique characteristics of a client portfolio
Developed to solve for a specific client need using credit bureau and client master-file data
Used for finding new customers, offering the most appropriate terms, or managing existing relationships
Custom-built to target a variety of products and industries, including bankcard, auto, student loan, personal loan, mortgage, telecommunications, utilities
Custom Modeling Our approach
9 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Our key differentiators in custom modeling
One of the leading modeling companies in the world, with a depth of experience in building custom scoring solutions
Our best-in-class approach to attribute development
Vast and unique data sources
Team approach which focuses on your needs and goals
Use of advanced segmentation techniques create a strong and robust model
Over 1,500 custom solutions delivered world wide
Custom Modeling Our approach
10 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Premier AttributesSM is the credit industry’s most robust and comprehensive set of credit attributes that enable organizations to make more strategic and data driven decisions
Experian credit data experts spent nearly three years developing Premier AttributesSM
► Premier AttributesSM were developed using the latest data sources, products and industries available from the three credit bureaus
► Over 1,000 attributes available including a core set and a series of unique industry classifications
Premier AttributesSM provide consumer data at the most granular level resulting in enhanced modeling and analytical opportunities
Custom Modeling Our attributes
11 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Premier AttributesSM were developed by industry-best data experts to exploit all aspects of consumer credit data, including:
Improved attribute accuracy – by utilizing new data elements and industry trends in the detailed definition, the attributes warrant:
► Refinement of industry/product designations
► More accurate attribute leveling across bureaus
► Significant lift in KS / single attribute performance
New attributes – expanding industry and product designations provide additional opportunities in segmentation and risk assessment
Custom Modeling Our attributes
12 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Custom Modeling Development process
Steps in the model development process
Modeling method
Our model development protocol follows five phases:
► Model and sample design
► Data exploration
► Segmentation and preliminary analysis
► Final model development
► Delivery and implementation
The process is adaptable to meet any of your internal requirements
Modeling philosophy
Our disciplined approach to model development is employed in a manner which is both transparent and adaptable to the unique needs of each of our clients for:
► Sound model governance
► Intensive audit
► Thorough documentation
13 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Within North America, Experian has been developing models since 1976 and our clients include most of the Top-10 card issuers in the U.S., the Top-5 mortgage lenders / retail banks in the U.S., and the Top-4 consumer finance companies
We develop scoring models using industry-approved statistical techniques
► These techniques, combined with industry-leading consulting expertise, ensure not only the most predictive models, but also the best fit for you
Our consultants and statistical analysts have a vast background and significant experience in developing and delivering custom models which extend across all stages of the credit life cycle
We have proven methodology in linking data and building, tracking and implementing sophisticated models, resulting in strong operational use
Our knowledge transfer of the process and models are a core part of the project process
Our team develops models that are resilient in structure under constantly changing economic conditions
Custom Modeling Our expertise
14 © 2012 Experian Information Solutions, Inc. All rights reserved. Experian Public.
Custom Modeling Summary
Experian’s modeling approach is flexible and adaptive to meet our clients’ needs
We will build models which augment existing modeling infrastructure or develop new models to meet specific decisioning requirements
We will develop utilizing the richness of historical credit information available and leverage our deep experience in working with multiple data sources
We will analyze segments by product, region, sales channel or other configurations
We will mine the data to find opportunity areas that might not be recognized at an aggregate level
We strictly impose best in class modeling practices, time series analytics, model diagnostics and consistency of results
We will ensure that each model works from both a statistical as well as a business standpoint
We will provide extensive documentation, supporting model governance
We will work closely with you to provide transparency, from project design through implementation and beyond
We will build models with strong performance and longer shelf lives